Connecticut spent more than $109 million on Earned Income Tax Credits

Editor's note: This version updates and corrects the original story posted Thursday afternoon.

Connecticut's Earned Income Tax Credit might be re-negotiated as state legislators try to close a $1.1 billion budget deficit for the fiscal year beginning July 1.

"It has been on my radar in terms of cutting programs," said state Rep. Edward Moukawsher, D-Groton.

The program cost the state $109 million in 2012, based on 2011 tax filings. About 180,000 Connecticut households with average incomes of $18,000 received an average of $600 in 2012, according to the Fiscal Policy Center at Connecticut Voices for Children.

The program was based on the federal Earned Income Tax Credit program, which on average provided a $2,000 in tax credit for workers earning an average of $18,000, the policy center said. The federal program cost about $56 billion in fiscal year 2011 and the Government Accountability Office estimated that 23.5 percent or $15.2 billion was paid incorrectly.

"What most people will admit is it is fraught with fraud," said House Majority Leader Larry Cafero, R-Norwalk. … "Fifteen to 25 percent on the federal level, and ours piggybacks off of that."

In last month's deficit mitigation bill, legislators agreed to find $1 million of fraud in the Earned Income Tax Credit program.

Wade Gibson, senior policy fellow at the Fiscal Policy Center at Connecticut Voices for Children said he wants tax fraud across all programs investigated but that capturing a couple hundred dollars from poor people might not be the way to go.

"Tax fraud; it's usually not with poor people, it's usually with much more wealthy corporations," Gibson said.

Some lawmakers are also frustrated that many Earned Income Tax Credit beneficiaries don't pay much in state income taxes, however, they receive a "refund."

"They are not paying income taxes and they are getting a payment just based on their income and family situation," Moukawsher said.

If someone who used the Earned Income Tax Credit was paying a state income tax it would be small because a single person making $12,000 and less does not pay a state income tax, according to the state Department of Revenue Services.

An individual without children who qualified for the state or federal Earned Income Tax Credit would have to earn less than approximately $13,900, according to the Center on Budget and Policy Priorities. Individuals or couples without children would have to earn less than approximately $19,200 and individuals or couples with children would have to earn less than approximately $50,300.

The Office of Fiscal Analysis estimated that the program would cost $116.5 million in fiscal year 2013. Because the tax credit is new and roughly 10 percent of the current $1.1 billion budget deficit it might be challenging to keep.

"If we want to help people, we create a program, but we never take the time to see if we can pay for it," Cafero said. "So now when the citizen gets used to the program we find ourselves in the same position as we did last month."

In New London County 13,911 households claimed the credit and each received on average $598. Hartford County had the most claims, 51,322 households, each receiving and average of $614.

The aim of the tax credit was to make the state tax code more progressive and offset sales tax increases, the policy center said.

"Whatever the merits are, one way or another, I just didn't think we could afford (it) when we did it and don't see how we can afford it now," Moukawsher said.